WTI rebounds toward nearly four-month highs after Saudi pipeline shutdown

West Texas Intermediate (WTI) oil price rebounds after falling nearly 4% in the previous trading day, hovering around $99.40 per barrel during Asian hours on Monday. Crude oil prices are rising toward nearly four-month highs following a drone attack that forced Saudi Arabia to shut down a major crude pipeline.

This disruption has heavily impacted a critical route traditionally used to bypass the Strait of Hormuz. As a precautionary measure, Saudi operations on the East-West pipeline were suspended immediately following Thursday's attacks, and officials have not yet indicated when normal operations will resume.

Concurrently, diplomatic efforts have stalled in the region. According to Oman's Foreign Minister Badr Albusaidi, talks between Iran and several Gulf nations aimed at establishing a temporary shipping corridor through Hormuz have been postponed. Reports indicate that Saudi Arabia harbored concerns regarding the proposal, while Bahrain officially stated it would not participate.

The unexpected closure of the East-West pipeline underscores its vital role in maintaining steady energy flows across the Middle East, particularly while the US and Iran remain at an impasse over the control of Hormuz. Stretching across Saudi Arabia to deliver oil directly to Red Sea ports, the pipeline boasts a massive capacity of around 7 million barrels per day.

Brown Brothers Harriman’s Elias Haddad cautions that, despite the recent easing in Brent after its latest surge, geopolitical risk remains a key constraint on any sustained downside. BBH argues that “Iran has every incentive to keep the heat on ahead of the November 3 midterms and hurt Republicans,” suggesting that any relief-driven pullback in Oil prices is likely to be shallow and short-lived.